Municipal fiber needs more FDR localism, fewer state bans

Op-ed: Community-owned broadband is one way to bring fiber to smaller markets …

How frustrating to be the mayor of a small town without good broadband access today. Imagine trying to entice businesses or entrepreneurs to a region where the best Internet option is the slow DSL most of us discarded nearly a decade ago for faster speeds.

The “broadband market” in much of the US happily provides snail-speed connections at inflated prices when compared to many of our peer nations. Cable and telephone companies see little reason to upgrade these networks—the low population density does not lend itself to quickly recovering investments.

Recognizing the disconnect between the best interests of distant shareholders and the best interest of their community, cities across the US have built their own networks, taking a page from the thousands of small cities that built their own electricity networks a century ago when private utilities ignored them.

Lafayette, Louisiana is a good example. The city begged its incumbents to beef up local broadband networks and was rebuffed. This Cajun country community decided to build its own next-generation network. The incumbents argued that the households and businesses of Lafayette had all the broadband they needed and sued to stop the city. This year, after years of litigation, the victorious city began connecting customers to LUS Fiber.

LUS Fiber may offer the best broadband value in the country, offering a true 10Mbps symmetrical connection for $29/month. Those wanting the 50Mbps symmetrical connection have to pony up just $58/month—about what I pay to my cable provider in Saint Paul for "up to" 16/2 speeds.

Unsurprisingly, the cable incumbent has now decided Lafayette is a priority and will be upgraded to DOCSIS 3.0 to offer faster tiers.

Barriers

Lafayette and Monticello were lucky because they had the power to build a digital network. Many communities do not. The Institute for Local Self-Reliance, where I am a researcher, compiled a basic map of the United States showing states that have enacted barriers to these community networks.

Municipal networks restriction map

Eighteen states impose some barriers to community broadband. Texas, Arkansas, Missouri, and Nebraska have an outright ban. Other states erect administrative and procedural hurdles that make it difficult for communities to invest in a full-service network. Though Monticello and Lafayette have succeeded in spite of barriers, many other communities are unable to persevere, and watch their younger generation leave for modern opportunities elsewhere.

As I’ve already noted, communities have fought this fight before—when electricity was only available to the urban and affluent. Profit-maximizing companies not only refused to build the grid to low-profit areas but argued those areas should not be permitted to wire themselves. Fortunately, FDR saw things differently:

I therefore lay down the following principle: That where a community—a city or county or a district—is not satisfied with the service rendered or the rates charged by the private utility, it has the undeniable basic right, as one of its functions of Government, one of its functions of home rule, to set up, after a fair referendum to its voters has been had, its own governmentally owned and operated service.

We need FDR to remind us that we are discussing the basic right of a community to invest in its future. Communities must not be held hostage by an absentee company that knows it can overcharge and under-invest without consequence.

Wireless is nice for mobility, but does not threaten the wired monopoly or duopoly. These networks—particularly full fiber-optic networks—are natural monopolies. There is no natural “market” any more than one could imagine a competitive market in streets or metro airports. This is infrastructure—the foundation for many other markets.

Are public networks a failure?

Why then, do one in three states discourage community-owned networks? Telecommunications companies—particularly those awash in revenues from mobile phones—can throw an overwhelming number of contributions, lobbyists, and “think tank” reports at legislators to convince them to ban or restrict publicly owned networks. Few legislators have a background in telecom and those that do typically come from industry.

Christopher Mitchell

Industry-funded think tanks have produced many reports claiming publicly owned networks are failures. Their methodology is suspect—equating long-term investments in next-generation networks with lost money. Using this methodology, any homeowner who fails to completely pay off his mortgage within a few years has failed.

The truth is that publicly owned networks do quite well. Communities typically borrow from outside investors to build the network and pay off the loans over a 15-20 year period with revenues from phone, television, and broadband services (for wired networks). These networks have eased telecom budgets (e.g. by increasing speed to schools while dramatically cutting costs) and encouraged economic development. Nationally, they average high take rates—a measure of how many people take service on the network.

State barriers to publicly owned broadband networks may benefit monopolistic cable and telephone companies but can cripple communities within those states. Of course, such policies also give a competitive edge to cities in other states who have moved ahead.

“Actually,” says Lafayette’s Republican Mayor, Joey Durel, “I often say with tongue firmly planted in cheek that I hope that the other 49 states do outlaw what we are doing. Then I will ask them to send their technology companies to Lafayette where we will welcome them with open arms and a big pot of gumbo.”

To me, it is a surprise that after losing in court, they decided to upgrade the Lafayette network. I thought small towns with a small number of customers don't lend themselves to recovering investments quickly, especially with competition in the area.

If an upgraded cable network wasn't profitable even in a monopoly, how can it be profitable in a duopoly?

It's sad that the telco's and cable companies have local government wrapped around their fingers like putty. How many communities begged for telco's to run fiber to the home and only saw action once they tried to construct community owned fiber networks? Ars Technica has run several stories on that subject in the last year or so.

Community owned networks really make the most sense (just like roads are considered publicly owned). Get rid of telco and cable ownership of the lines and make them simply service providers. This will benefit consumers by allowing more entrants into the ISP arena and thus up the ante in terms of competition (thus boosting savings to consumers and a desire to outdo the other competitors in the customer service area).

Originally posted by amardeus:I hate the telco's and cable companies with a passion. They're slowing down progress.

Don't blame the telco's or cable companies. They're just doing what's in their best interest. Blame the dipstick politicians that sell their power to the highest bidder rather than serve the public interest.

Did I miss the part of the article where local municipalities had thair franchising rights pulled in so that free market competition could have a go? Most muni's put so many restrictions on the second or third franchisor that it's not economically possible to do it. I've seen articles of cities across the country telling new bidding companies for a second and third cable franchise that they had to do city wide buildouts within 3 years and spend millions upgrading various city parks.

How bout a little less FDR and more Lincoln? I mean hell Lincoln got an intercontinental railroad built with no dollars outlayed by the feds and turned a profit on the land give away when the railroads had to carry cargo for the feds at reduced rates for a number of years.

Originally posted by amardeus:I hate the telco's and cable companies with a passion. They're slowing down progress.

Don't blame the telco's or cable companies. They're just doing what's in their best interest. Blame the dipstick politicians that sell their power to the highest bidder rather than serve the public interest.

I blame them both. Why is it only on the politicians to not be self-serving shitheads?

It is really inexpensive if the town or city already has a power utility especially if it is planning smart meters.

The cheapest route is a fiber to the block network with wireless N 2/5 Ghz Access points at each block node. From that block node signal can be distributed via 1 GigE copper to most subs and fiber to the rare more distant ones. The small incremental cost of the high speed network over the low speed smart meter requirement pays for the whole network for a extra few dollars a month per subscriber. Large multiunit complexes can be serviced with HPNA 3.O at 100 Mbps speeds.

The cheapest subscribers or a smartphone user can connect at a lower speed but still substantially higher than Docsis 3.0 using WIFI. Home and portable users can use VOIP, IPTV, or IPTV settop boxes via wireless or wired connections. IPTV and VOIP providers are now available on the internet with these extreme high speed networks.

There are no major economies of scale here so a small network is almost as inexpensive as a large one.

According to Time Warner their profit on broadband is over 3000% with their ancient antiquated cable equipment. They could cut their fees to 3% of current level and still make money - lots of room for a nonprofit to provide a service at for a few bucks a month.

Be even cheaper if the municipalities tied themselves together in some kind of non profit telecom authority. Once big enough they could use carrier type arrangements at transit nodes to reduce access costs to minimal level.

This would of course put big Telecom out of business and they ain't dying without a fight.

Originally posted by amardeus:I hate the telco's and cable companies with a passion. They're slowing down progress.

Don't blame the telco's or cable companies. They're just doing what's in their best interest. Blame the dipstick politicians that sell their power to the highest bidder rather than serve the public interest.

Originally posted by ricbach229:How bout a little less FDR and more Lincoln? I mean hell Lincoln got an intercontinental railroad built with no dollars outlayed by the feds and turned a profit on the land give away when the railroads had to carry cargo for the feds at reduced rates for a number of years.

The Internet already exists. The issue at hand here is end user access. The FDR analogy of municipal utilities is very apt, hand waving about Lincoln's railroad is not.

The article gets it exactly right.... in a lot of states, for some STUPID reasons, municipalities are FORBIDDEN to compete with the private companies or to make agreements with them to provide service to EVERYONE in that municipality for low cost or even ANY COST!

That is stupid to the extreme, and ANOTHER kowtowing to the conservacreep IDIOTS who think that 'government has an unfair advantage... they don't have to worry about profit!'

Well, what would they do if say..... a NON-PROFIT organization was started up that offered these things to people at low cost? The same thing would still be true, the profit motive WOULD NOT BE THERE so they would supposedly have an 'unfair advantage' over the for-profit companies.

Someone needs to SLAP the Republicans, neo-conservacreeps and regular conservacreeps, and remind them that NOT FOR PROFIT is not a bad thing, nor will it 'ruin America'. It will just give private business a 'run for their damned money' and make them start treating their customers more like customers instead of slaves.

Congress needs to give the FCC the power to make it illegal for any state to restrict municipalities from builging their own broadband networks. Perhaps by banning the Internet and television in any non-compliant state, if the Constitution doesn't allow doing this directly.

Originally posted by Abresh:Someone needs to SLAP the Republicans, neo-conservacreeps and regular conservacreeps, and remind them that NOT FOR PROFIT is not a bad thing, nor will it 'ruin America'. It will just give private business a 'run for their damned money' and make them start treating their customers more like customers instead of slaves.

Damn straight. Unfortunately, until we vote these people out of office, they just don't care. So may I suggest you take part getting rid of these people in trying to convince other people to see things your way by doing some volunteering?

Get rid of telco and cable ownership of the lines and make them simply service providers.

Wow. Is that really the government's role? It's funny how so many people bitch about this kind of thing, as if you are entitled to free or low cost broadband. Broadband is like any other commodity on the open market, it isn't something that should be paid for with tax dollars.

Get rid of telco and cable ownership of the lines and make them simply service providers.

Wow. Is that really the government's role?

Yes, commerce regulation is the government's role.

quote:

It's funny how so many people bitch about this kind of thing, as if you are entitled to free or low cost broadband. Broadband is like any other commodity on the open market, it isn't something that should be paid for with tax dollars.

It's already being paid for with tax dollars and right-of-way. That's why these telcos and cable companies should shut the hell up and build out according to their customers' needs instead of simply maximizing their profits.

The argument about community broadband vs. private sector is often reduced, incorrectly, to just two options:

--Leave it all to the incumbents and keep government out

or

--Local government competes directly with the private sector.

But there is a third way that is in fact working extremely well and provides the appropriate balance between public and private interests:

--Local governments build a digital "road" network and make network capacity available to private sector providers, including the incumbents.

In this "third way" model, local government builds and maintains the basic infrastructure but does NOT sell services in competition with the private sector. Instead, private sector providers compete with each other to deliver services over the community broadband network.

This model rarely gets discussed because the incumbents are afraid of it. But in communities where this model is already in play, prices for services like Internet access are dropping by 40% to 70% because of the increased competition.

The Wired Road is one example of this model (www.thewiredroad.net).nDanville is another (www.ndanville.net).Utopia, despite some early problems, is doing extremely well.

Get rid of telco and cable ownership of the lines and make them simply service providers.

Wow. Is that really the government's role? It's funny how so many people bitch about this kind of thing, as if you are entitled to free or low cost broadband. Broadband is like any other commodity on the open market, it isn't something that should be paid for with tax dollars.

I think the ultimate issue is that services should be competitive, infrastructure cannot be. d9online above offers a great option, but those networks remain difficult to finance because they generate less revenue, particularly in the early years.

As for the idea that cities have prevented competition by making unreasonable demands, that is prohibited by law and there have been less than 10 documented infractions since passed in 1996. Further - many states have taken that power entirely out of the hands of the local government and yet they still have very little competition.

The truth is that overbuilding is tremendously difficult and any profit-maximizing entity is smart to invest elsewhere. This is one of the reasons I believe in public ownership of infrastructure - it is only the way to create a robust market for service providers.

For this, I think FDR is quite relevant - without his programs to build infrastructure, I don't think the US could have developed such a strong market economy.

Originally posted by xdre:It's already being paid for with tax dollars and right-of-way. That's why these telcos and cable companies should shut the hell up and build out according to their customers' needs instead of simply maximizing their profits.

Which is not an example of free market and capitalism. Businesses are in it for the money, charities are in it for the people. If we wanted this to be for the needs of people, it would need to be a Govt program.

Originally posted by xdre:It's already being paid for with tax dollars and right-of-way. That's why these telcos and cable companies should shut the hell up and build out according to their customers' needs instead of simply maximizing their profits.

Which is not an example of free market and capitalism.

No, what it is is an example of a properly balanced capitalist system. The consumer gets what they want or need at a reasonable price, and the business makes money. Right now it's a natural monopoly that leans heavily toward the business.

quote:

Businesses are in it for the money, charities are in it for the people. If we wanted this to be for the needs of people, it would need to be a Govt program.

That is a very black-or-white viewpoint. People need to eat yet McDonald's is still highly profitable. It's not an either-or situation.

It's already being paid for with tax dollars and right-of-way. That's why these telcos and cable companies should shut the hell up and build out according to their customers' needs instead of simply maximizing their profits.

Not necessarily. Verizon's Fios build is self funded, and was the largest capital investment of any company in the nation last year. So, under your premise, the Govt now has the right to claim ownership of this network. This isn't "commerce regulation", you are talking about government takeover of privately owned assets.

If the government were to take over the job of building out broadband, where would the money come from? Yep - taxes. Last I checked, the role of the Government isn't to provide internet service to the people.

No, what it is is an example of a properly balanced capitalist system. The consumer gets what they want or need at a reasonable price, and the business makes money. Right now it's a natural monopoly that leans heavily toward the business.

What are you talking about? By your reasoning, the Government should be able to set prices in every market. Broadband isn't a monopoly. There are plenty of providers in the country.

Originally posted by 3power:There are plenty of providers in the country.

That's absolutely pointless unless a person is able to get service from all those providers. In my area, the cable is run by Comcast. Good luck switching to Time Warner or some other cable provider. No competition.

Originally posted by 3power:There are plenty of providers in the country.

That's absolutely pointless unless a person is able to get service from all those providers. In my area, the cable is run by Comcast. Good luck switching to Time Warner or some other cable provider. No competition.

Can you get Direct TV? Dish? Fios TV?

You won't get a dedicated network built in every community by every provider. That would not be cost effective for ANY business.

Secondly, you should look at your local franchising regulations. There are more roadblocks to providing TV services than you might think - many of them imposed by the same municipalities that you want to hand the reigns to.

Originally posted by amardeus:I hate the telco's and cable companies with a passion. They're slowing down progress.

Don't blame the telco's or cable companies. They're just doing what's in their best interest. Blame the dipstick politicians that sell their power to the highest bidder rather than serve the public interest.

You are both wrong and right in the same way.

Blame both sides. Blame the telco's and cable companies for running their businesses in ways that exploit the weaknesses of a capitalistic society. Blame the corrupt politicians for "just doing what's in their best interest" instead of the public's best interest.

Thank the honest politicians and businesses who fight against both the corrupt politicians and the shitty telco's and cable companies through the combination of consumer friendly competitive business practices and effective regulations.

Originally posted by 3power:What are you talking about? By your reasoning, the Government should be able to set prices in every market. Broadband isn't a monopoly. There are plenty of providers in the country.

In most places, it's locally a monopoly, which is all that really matters.

The gov't shouldn't fix prices. If a local gov't provides broadband, the broadband should be funded by subscribers just as with a private company, and it should have to be price-competitive. It shouldn't be funded by taxes, which is unfair because it allows the gov't provider to set its prices unsustainably low. One solution is to have the gov't own the infrastructure, which is the barrier to entry that naturally results in monopolies, and allow anyone to provide services on that infrastructure.

Originally posted by 3power:There are plenty of providers in the country.

That's absolutely pointless unless a person is able to get service from all those providers. In my area, the cable is run by Comcast. Good luck switching to Time Warner or some other cable provider. No competition.

Can you get Direct TV? Dish? Fios TV?

You won't get a dedicated network built in every community by every provider. That would not be cost effective for ANY business.

Secondly, you should look at your local franchising regulations. There are more roadblocks to providing TV services than you might think - many of them imposed by the same municipalities that you want to hand the reigns to.

The first two, no, due to issues with the apartments. While they allow dishes, they must be attached to your individual patio. Mine is not facing the proper direction and is surrounded by other apartments. No go on that. While the FiOS connectivity is offered, the TV option is not offered. They require you to do a tie-in deal with Dish, I believe - though, that's covered in my earlier answer.

My point was not that I want the government to run things, though I do find the "pipes as a utility" concept intriguing. I agree with the folks that say it's our local governments that got many of us into the 1-provider mess. However, I fail to understand why we wouldn't use the elected officials in our municipality to correct the very same mistake that earlier administrations originally created.

It's already being paid for with tax dollars and right-of-way. That's why these telcos and cable companies should shut the hell up and build out according to their customers' needs instead of simply maximizing their profits.

No, what it is is an example of a properly balanced capitalist system. The consumer gets what they want or need at a reasonable price, and the business makes money. Right now it's a natural monopoly that leans heavily toward the business.

What are you talking about? By your reasoning, the Government should be able to set prices in every market.

Strawman. I'm not asking the government to set prices; I'm asking it to keep businesses honest.

quote:

Broadband isn't a monopoly.

That explains why local communities aren't having any problems with broadband providers then.